A supply chain encompasses all of the activities associated with the process of moving goods through a network of facilities and distribution channels from suppliers to manufacturers to distributors to retailers to final consumers. Managing the chain of events in this process is known as Supply Chain Management (SCM). Companies use SCM to make critical decisions about production, purchasing, scheduling, transportation, warehousing, order processing, inventory control, information management, and customer service. The key to the success of a supply chain often is the speed with which these activities can be accomplished. The results of a successful SCM system can lead to reduced inventories, lower operating costs, shorter time-to-market, and increased customer satisfaction.
SCM applications generally perform one of two functions: planning or execution. Supply chain planning applications design and implement scheduling systems for enterprise systems. Supply chain execution applications focus on SCM logistics, such as coordinating the production, transportation and storage of materials. This artificial division of labor between planning and execution in SCM applications has limited their effectiveness.
Sourcing and procurement are critical to SCM processes. Sourcing generally deals with the search for and identification of suppliers of materials and services; it can be more strategic than procurement. Sourcing often involves locating potential suppliers and then evaluating, developing and managing their capabilities in a manner consistent with the enterprise's plans for meeting customer expectations and needs. Procurement, on the other hand, generally deals with the day-to-day activities of purchasing materials. Procurement can be more tactical than sourcing.
Sourcing is intended for the strategic sourcing group of an enterprise, which is concerned with long term decision-making about which materials to source, from which suppliers, under what contract terms, etc. Procurement is targeted to the enterprise's buyers, who must deal with the day-to-day tasks of purchasing the necessary materials for the enterprise's production-related operations. The primary goals of procurement is to ensure the uninterrupted supply of materials by purchasing under contract from current suppliers, by identifying new suppliers, and by purchasing from new and existing marketplaces.
Current procurement applications focus on the procurement of indirect or Maintenance, Repair and Operating (MRO) materials, but not on direct materials. MRO materials are not related to manufacturing; they include copy toner, light bulbs, toilet paper, etc. Direct materials, on the other hand, are directly related to manufacturing and include a wide variety of product components. One of the primary distinctions between direct and indirect materials is that indirect materials do not require customization because they can be purchased from a catalog. Direct materials, however, may require customization depending on the type of product, process or system being implemented. In addition, because direct materials are critical to the manufacturing process, a variety of considerations relating to continuous quality supply have to be made.
With constant mergers and acquisitions, the increasing use of outsourcing, and shortening product life cycles, global manufacturers are facing challenges that increasingly fragment an already complex and extended procurement process. Considering that the majority of manufacturer's expenses come from the procurement of direct goods, enterprise solutions that can identify cost saving opportunities and mitigate risks are becoming more critical to business operations. The present invention, a Value Chain Intelligence (VCI) system and methods based thereon, provides improved solutions to such problems. For instance, a large enterprise, such as Motorola or other phone/system manufacturer, can use a VCI system to locate chip components on the spot market at lower prices than its current contract pricing. In another example, an enterprise, such as Ericsson or other phone/system manufacturer, can use a VCI system to locate additional suppliers for critical cell phone components when an unexpected event like a manufacturing plant fire creates a shortage of those necessary components. The present invention provides these solutions by not only integrating enterprise and marketplace information, but also by analyzing that information and alerting users about opportunities to reduce risk and save costs.
With the growth of the Internet and the resulting changes in the speed and access of information, it has been determined that companies would greatly benefit from solutions that provide continuous access to the many types of information that are now available and can intelligently incorporate this information into their SCM processes. If such access were provided (as in accordance with the present invention), companies would be able to analyze both enterprise data and market data for risks and opportunities, make strategic decisions based on those risks and opportunities, and be able to automate their operations around this critical information. It thus would be highly advantageous for companies to be able to integrate these solutions into their SCM processes.
Existing enterprise applications, however, have focused on streamlining internal processes without incorporating external data from suppliers and markets. With the recent development of private and public online marketplaces, which generate a wealth of potentially useful external data, it has been discovered that enterprise applications, such as in accordance with embodiments of the present invention, now have the opportunity to access critical external data from these sources and integrate this data with the internal data of enterprise systems. Unfortunately, prior to the present invention internal supply chain data from a variety of custom databases and Enterprise Resource Planning (ERP) applications has remained fragmented across multiple systems, and the relevant external data are frequently dispersed and difficult to access. Thus, existing applications currently do not have the tools to access or integrate external data with internal data.
The present invention is an effort to address such limitations of conventional approaches with a Value Chain Intelligence (VCI) system, which integrates the external and internal data required by manufacturing companies to gain strategic insights into ever-changing business demands and requirements. Targeting procurement and supply chain professionals, VCI systems in accordance with the present invention provide a variety of solutions that enable companies to reduce the risk of shortages, quickly take advantage of market opportunities, and improve overall capital efficiency. Such VCI systems allow companies to access external supplier and spot market data, integrate this data with internal data from multiple enterprise systems, analyze the impact of this data on the supply chain to identify risks and opportunities, and act on these findings. Such VCI systems may be used to combine supply chain planning and execution functions with other services, such as data integration, demand forecasting, and continuous market analysis, enabling users to not only gain insights into their supply chain operations, but also share the data among all participants in the supply chain network.